) ho Important MCQs - Economics Chapter 2 Reece Retoe Ce eerkk ~ CA Mohnish Vora (MVSIR) Q Faculty for CA Foundation- Business Economics & BCK CA Intermediate- Financial Management & Economics Q Known for making concepts easy and amazing notes Amongst the TOP educators on Unacademy Q 3+ years of Teaching Experience Q 10th & 12th Merit Student (CBSE) Q National Level Roller Hockey PlayerCA Foundation - December 2022 ZA Netw attra Date Time a ary te pec | &:30PM107.30PM | YouTube BCK Chapter 1 & 2 10.15 PM to 12.30 AM | YouTube BCK Chapter 3, 4, 5 9.45 AM to 11.15 AM eae Ean ioaeos so bee 11.30 AM to 12.45 PM Secs cn mee cherie 8.00 PM to 9.45 PM fees ay cae lowing 10.00 PM to 12.00 PM | foerna S.| pu syllabus Quiz 20 Dec | 8.15 AM to 10.30 AM | YouTube Less, SS ae reat ay YouTube Channel “Unacademy CA Foundation” ens (MVSIR)NE Link for MVSIR classes BCK Chp 1 & 2- Pre EXAM Marathon > PLAY _| Live today at 6.30 PM (NEW NOTES) BCK Chp 3, 4 & 5 - Pre EXAM Marathon > PLAY _ |Live today at 10.15 PM (NEW NOTES) BCK Chp 6- MCQ based Marathon > PLAY All MCQs covered Eco Chp 1 & 5 Marathon > PLAY ‘9K+ views Eco Chp 2 Marathon- All Imp topics > PLAY 60K+ views Eco Chp 3 - Unit 1 - Prodcution | Marathon > PLAY 18K+ views > PLAY > PLAY Eco Chp 3 - Unit 2 - Cost | Marathon > 12K+ views Eco Chp 4 - Marathon > 47K+ viewsPo eo REC OME Cite MANZIL BATCH Se et @ CA FOUNDATION May/June 2023 - REGULAR PLUS BATCH subscription eee eee ee Be acer! v Perel RS re rencny oer ert CN ere Cec’ posse) ad Denese e ras prereset 3104 a 8.00 AM to 10.00 AM. Adarsh Joshi Sir Maths, Statistics & LR- CA Prana Popat Sir ood 9.45 AM to 11.5 AM 10.15 AM to 11.45 AM rants - By CA CS Darshan Sir All subjects will be started from basics, so anyone can join the batchWea Use code “MVSIR” to get maximum discounts & offers on Rae CA Foundation and CA Inter Subscriptions Crd Limited period offer till (MVSIR)Watch all free sessions of MVSIR on - Chapter 2 Theory of DemandWatch all free sessions of MVSIR on - UT thmet Basics of DemandWatch all free sessions of MVSIR on - bit.ly/mvsirunacademy ICAI SM 1 | Demand for a commodity refers to: a)desire backed by ability to.pay for the commodity b)need for the commodity‘and willingness to pay for it c)the quantity demanded of that commodity at acertain price. d)the quantity of the commodity demanded at a certain price during any particular period of time =Watch all free sessions of MVSIR on - bit.ly/mvsirunacademy AQ. Successful business firms spend considerable time, energy and efforts in analyzing the for their products. a)Supply b)Price c)Demand d)None of these =Watch all free sessions of MVSIR on - bit.ly/mvsirunacademy 3 | Quantity demanded is a: a)Flow Concept b)Stock Concept c)Both (a) and (b) d)None of the above ()Watch all free sessions of MVSIR on - Determinants of DemandWatch all free sessions of MVSIR on - bit.ly/mvsirunacademy MTP May 20, ICAI SM If the price of orange Juice increases, the demand for apple Juice will a)increase because they are substitutes b)decrease because they are substitutes c)remain the same because real income is increased d)decrease as real income decreasesWatch all free sessions of MVSIR on - bit.ly/mvsirunacademy SEQ, ICAT SM If the price of Pepsi decreases 5 relative to the price of Coke and 7- UP, the demand for a)Coke will decrease. b)7-Up will decrease. c)Coke and 7-UP will increase. d)Coke and 7-Up will decrease.Watch all free sessions of MVSIR on - ICAI SM 6 Which of the following is an incorrect statement? a)When goods are substitutes, a fall in the price of one (ceteris paribus) leads to).a fall in the quantity demanded of its substitutes. b)When commodities are complements, a fall in the price of one (other things being equal) will cause the demand of the other to rise c)As the income of the consumer increases, the demand for the commodity increases always and vice versa, d)When a commodity becomes fashionable people prefer to buy it and therefore its demand IncreasesWatch all free sessions of MVSIR on - bit.ly/mvsirunacademy SEQ ___ and ____ do not directly affect the demand curve a)the price of related goods; consumer incomes b)Consumer incomes, tastes c)the costs of production, bank opening hours d)the price of related goods, preferences 2Watch all free sessions of MVSIR on - bit.ly/mvsirunacademy AQ. The most crucial determinant of demand for an item is 8 a)Income of consumer b)Prices of other related:goods c)Taste and preference of consumer d)It’s own priceWatch all free sessions of MVSIR on - bit.ly/mvsirunacademy MTP Mar 18 If distribution of income is more 9 |equal, then the propensity to consumer of the country is a)Relatively High b)Relatively Low c)Unaffected d)None of the aboveWatch all free sessions of MVSIR on - bit.ly/mvsirunacademy MTP Mar 18 When the price of a substitute of X 10 commodity falls, the demand for X a) Rises b)Falls c)Remains unchanged d)Any of the above. 2Watch all free sessions of MVSIR on - bit.ly/mvsirunacademy Extra MCQ In case of essential consumer goods, if 11 the income of the consumer increases then, a)Increase in income leads to higher demand, but this increase will be less than proportionate to the increase in income b)Increase in income leads.to lower demand, but this decrease will be less than proportionate to the increase in income c)Increase in income leads to no change in demand d)Increase in income leads to higher demand, but this increase will be more than proportionate to the increase in incomeWatch all free sessions of MVSIR on - bit.ly/mvsirunacademy Extra MCQ refers to the extent to which the demand for a commodity is increased due to the fact-that others are also consumingy the same commodity a)Demonstration Effect b)Snob Effect c)Bandwagon Effect d)Veble Effect =Watch all free sessions of MVSIR on - bit.ly/mvsirunacademy MTP Oct 20, ICAI SM Which of the following statements about inferior goods is/are false? I.Inferior goods are those that we will never buy, no matter how cheap they are. TL.Inferior goods are“those that we buy more of, if we become poorer. IIL.Inferior goods‘are those that we buy more of, if we become richer. a)I and III only. b)I only c)EII only. d)I, IL, and IIT 7.Watch all free sessions of MVSIR on - bit.ly/mvsirunacademy Extra MCQ In a country where National Income 14 is unevenly distributed, which of the following statement is false ? a)propensity to consume of the country will be relatively less b)means few very rich~people while the majority are very poor c)demand for consumer goods will be comparatively less d)propensity to consume of the country as a whole will be relatively high =Watch all free sessions of MVSIR on - bit.ly/mvsirunacademy Extra MCQ Which of the following statements are true or false- 1)Snob Effect represents the desire 15 of people to be exclusive; to be different; to dissociate themselves from the "common herd. 2)Snob Effect,is-a function of price a)(1) & (2) are false b)(1) & (2) are true c)(1) Is true & (2) is false d)(1) Is false & (2) is true *Watch all free sessions of MVSIR on - Rationale of Law of DemandWatch all free sessions of MVSIR on - bit.ly/mvsirunacademy ICAI SM When total demand for a commodity 16 | whose price has fallen increases, it is due to: a)Income effect. b)Substitution effect c)Complementary effect d)Price effect =Watch all free sessions of MVSIR on - bit.ly/mvsirunacademy MTP Apr 21 17 | Incase of inferior goods: a)Income effect and substitution effect work in opposite direction b)Income effect and substitution effect work in same direction c)It leads consumerto’ purchase less of a good and more of the substitute d)None of these ()Watch all free sessions of MVSIR on - bit.ly/mvsirunacademy MTP Mar 21 When violation of law of demand occurs: 18 a)substitution effect is negative b)income effect is negative c)negative income effect is less than substitution effect d)negative income effect is greater than substitution effectWatch all free sessions of MVSIR on - bit.ly/mvsirunacademy MTP Mar 21, Mar 22 19 The substitution effect will be stronger when: a)the goods are closer substitute b)there is lower cost of switching to the substitute good. c)there is lower \ inconvenience while switching to the substitute good. d)all the above =Watch all free sessions of MVSIR on - Exceptions of Law of DemandWatch all free sessions of MVSIR on - bit.ly/mvsirunacademy MTP Mar 19, Aug 18, Oct 20, SEQ, ICAT SM In the case of a Giffen good, the 20 ‘i demand curve will usually-be a)horizontal, b)downward-sloping t@ the right. c)vertical. d)upward-sloping to the rightWatch all free sessions of MVSIR on - bit.ly/mvsirunacademy AQ. The price of a piece of jewellery rises, the demand for it may also rise as consumers attach a. to owning and displaying expensive items, a)money value b)use value c)snob value d)None of these =Watch all free sessions of MVSIR on - bit.ly/mvsirunacademy MTP Mar 22 22 For Giffen good the Engel curve is: a)Positive sloped b)Vertical c)horizontal d)Negative sloped =Watch all free sessions of MVSIR on - bit.ly/mvsirunacademy ICAI SM At higher prices people demand more of certain goods not for their worth but for their prestige-value ~ This is called a)Veblen effect b)Giffens paradox c)Speculative effect d)None of the above ()Watch all free sessions of MVSIR on - bit.ly/mvsirunacademy MTP Mar 22 According to Hicks and Allen the 24 demand curve slope downwards due to a)Law of diminishing marginal utility b)Income effect and substitution effect c)Either (a) or (b) d)None of theseWatch all free sessions of MVSIR on - Demand Curve & Demand ScheduleWatch all free sessions of MVSIR on - bit.ly/mvsirunacademy ICAI SM All but one of the following are assumed to remain the same while drawing an individual's-demand curve for a commodity. Which one is it? a) The preference of the individual. b)His monetary income: c)Price of the commodity d)Price of related goods. (_)Watch all free sessions of MVSIR on - bit.ly/mvsirunacademy SEQ If the demand curve for good X is 26 downward-sloping, an increase in the price will result in a)A decrease in the demand-for good X. b)No change in the quantity demanded for good X c)A larger quantity demanded for good X. d)A smaller quantity demanded for good X. 2Watch all free sessions of MVSIR on - Changes in DemandWatch all free sessions of MVSIR on - bit.ly/mvsirunacademy ICAI SM Suppose the price of Pepsi increases, 27 we will expect the demand curve of Coca Cola to: a)Shift towards left since. these are substitutes b)Shift towards right \since these are substitutes c)Remain at the same level d)None of the above =Watch all free sessions of MVSIR on - bit.ly/mvsirunacademy MTP Oct 19 A downward movement along a 28 demand curve indicate- _ a) Increase in demand b) Decrease in demand c) Contraction of demand d) Expansion of Demand (JWatch all free sessions of MVSIR on - bit.ly/mvsirunacademy ICAI SM An increase in the demand for 29 computers, other things remaining same, will: a)Increase the number of computers bought. b)Decrease the price \but increase the number of computers. bought. c)Increase the price of computers. d)Increase the price and number of computers bought =Watch all free sessions of MVSIR on - The diagram given below shows a)A change in demand which:may be caused by a rise in income and the good is a normal good b)A shift of demand curve caused by a fall in the price of ‘a complementary good H] c)A change in demand which is caused by a rise in income and the good is an inferior good Al d)A shift of demand curve caused by a rise in the price of a substitute and the good is a normal good:Watch all free sessions of MVSIR on - bit.ly/mvsirunacademy ICAI SM Tf roller- coaster ride is a function of 31 amusement park visit, then, if the price of amusement park entry falls a)Demand for roller- coaster ride will rise & demand curve shifts to right b)Demand for roller coaster ride cannot be predicted as it depends on tastes of consumers for ride c)There will be an expansion in the demand for roller coaster drive as_ it complementary d)None of the above (JWatch all free sessions of MVSIR on - bit.ly/mvsirunacademy Extra MCQ Redistribution of income away from 32 groups of people who favour the commodity will lead to___ a) Increase in demand b) Decrease in demand c) Contraction of demand d) Expansion of Demand =Watch all free sessions of MVSIR on - bit.ly/mvsirunacademy ICAI SM During a recession, economies experience increased unemployment and a reduced level of income. How would a recession likely:to affect the market demand for new.cars? a)Demand curve will shift to the right. b)Demand curve will shift to the left. c)Demand will not shift, but the quantity of cars sold per month will decrease. d)Demand will not shift, but the quantity of cars sold per month will increase *Watch all free sessions of MVSIR on - Price Elasticity of Demand - Percentage MethodWatch all free sessions of MVSIR on - bit.ly/mvsirunacademy ICAI SM Identify the coefficient of price- elasticity of demand when the percentage increase in the quantity of a good demanded is smaller than the percentage fall in its price: a)Equal to one. b)Greater than one. c)Less than one. d)Zero. =Watch all free sessions of MVSIR on - bit.ly/mvsirunacademy AQ. Let QX = 1500/Px elasticity of demand of good X when its price falls from $ 8 to $ 2 per unit, will be a)greater than one b)less than one c)equal to one d)can't say =Watch all free sessions of MVSIR on - bit.ly/mvsirunacademy Extra MCQ The price of a good decreases from Rs 80 to Rs 60 per unit. If price elasticity of demand = 2 Original Qty demanded ’= 50 units. Calculate the new qty demanded. a) 25 units b) 75 units c) 100 units d) 0 units C)Watch all free sessions of MVSIR on - ule MCR oR ae) g Demand - Point MethodWatch all free sessions of MVSIR on - bit.ly/mvsirunacademy MTP Oct 20, ICAI SM In the case of a straight line demand curve meeting the two axes, the price-elasticity of demand at the midpoint of the line would be :Watch all free sessions of MVSIR on - bit.ly/mvsirunacademy MTP Apr 21 From the following demand curve determine the elasticity at the given price Q= 1200 - 10P When P = 5, dQ/dP.=10 a)Elastic b)Inelastic c)Unitary elastic d)None of these ‘-Watch all free sessions of MVSIR on - Price Elasticity -Arc MethodWatch all free sessions of MVSIR on - bit.ly/mvsirunacademy AQ. With reference to Arc elasticity 39 |measures the responsiveness of demand on the demand curve. a)at one given point b)at intercepts on X-axis'& Y-axis c)between two points d)Any of the aboveWatch all free sessions of MVSIR on - bit.ly/mvsirunacademy ICAI SM Tf the local pizzeria raises the price of a medium pizza from Rs. 60 to Rs. 100 and quantity demanded falls from 700 pizzas a night to 100 pizzas a night, the price elasticity of demand for pizzas is :(Use~ Arc Elasticity Method) =Watch all free sessions of MVSIR on - In the ee cfr obi he demand curve of a points on the demand (P, Q) as (10, 2) & (8, 3) pect al point is A OR initial point is B, the price elasticity of demand will be a) same in both cases by point method of price elasticity of demand b)dif ferent in both cases by Arc method of price elasticity of demand c)same in both cases by Arc method & different by point method of price elasticity of demand d)None of theseWatch all free sessions of MVSIR on - bit.ly/mvsirunacademy MTP Mar 22 The Coefficient of Price elasticity of 42 |demand between two.-points on a demand curve is a)Arc elasticity b)Point elasticity ePrice elasticity d)None of theseWatch all free sessions of MVSIR on - aX MCHA Demand - Mee AReu me ValuesWatch all free sessions of MVSIR on - bit.ly/mvsirunacademy ICAI SM If regardless of changes in its price, 43 the quantity demanded of a good remains unchanged, then the demand curve for the good will be: a)horizontal. b)Vertical. c)positively sloped. d)negatively sloped,Watch all free sessions of MVSIR on - bit.ly/mvsirunacademy ICAI SM 44 |The steeper the slope of the demand curve, the is the demand. a)more elastic b)less elastic c)Either (a) or (b) d)None of the aboveWatch all free sessions of MVSIR on - bit.ly/mvsirunacademy MTP June 22 Consider the following statements and select the correct answer from the given options. Assertion (A): Demand curve is vertical when elasticity.of demand is zero, Reason (R): Marginal utility of a product is increasing a)Both (A) and (R) are true and (R) is the correct explanation of (A) b)Both (A) and (R) are true and (R) is not the correct explanation of (A) c)(A) is true but (R) is false d)(A) is false but (R) is true 2Watch all free sessions of MVSIR on - bit.ly/mvsirunacademy ICAI SM If electricity demand is inelastic, and 46 electricity charges increase, which of the following is likely to occur? a)Quantity demanded will fall.by a relatively large amount. b)Quantity demanded will-fall by a relatively small amount. c)Quantity demanded will rise in the short run, but fall in the long run. d)Quantity demanded will fall in the short run, but rise in the long run. (JWatch all free sessions of MVSIR on - bit.ly/mvsirunacademy MTP June 22 Which of the following statements is 47 correct? a)When the slope of the demand curve is zero, demand is infinitely elastic and when the slope is infinite, elasticity is zero. b)When the slope of the demand curve is zero, the elasticity is,also zero and when the slope is infinite, elasticity is also infinite. c)When the slope of the demand curve is zero, the elasticity is unity and also when the slope i s infinite, elasticity is unity. d)None of these 2Watch all free sessions of MVSIR on - axl oR A Demand - Total Outlay VAT X-Je|Watch all free sessions of MVSIR on - bit.ly/mvsirunacademy TP Oct 20, ICAI SM A firm learns that the own price elasticity of a product it manufactures is 3.5. What would be the correct action for this firm to take if it wishes to raise its total revenue? a)Lower the price because demand for the good is elastic. b)Raise the price because demand for the product is inelastic. c)Raise the price because demand is elastic. d)We need information in order to answer this question. f )Watch all free sessions of MVSIR on - bit.ly/mvsirunacademy Extra MCQ 49 |Tf demand for a good is inelastic, then as per total outlay:meth« a)Quantity Effect > Price Effect b)Quantity Effect = Price Effect c)Quantity Effect < Price Effect d)(a) or (c)Watch all free sessions of MVSIR on - bit.ly/mvsirunacademy MTP June 22 The share of the tax borne by seller 50 will be larger a)If the demand for the product is less elastic. b)If the demand for the product is inelastic. c)If the demand for the product has greater elasticity. d)If the elasticity of supply of the product is larger. ()Watch all free sessions of MVSIR on - bit.ly/mvsirunacademy ICAI SM, MTP Mar 22 ‘No matter what the price of coffee 51 |'S. Arjun always spend a total of exactly 100 per week on coffee.’ The statement implies that: a)Arjun is very fond of ycoffee and therefore he has an inelastic demand for coffee b)Arjun has elastic demand for coffee c)Arjun's demand for coffee is relatively less elastic d)Arjun's demand for coffee is unit elasticWatch all free sessions of MVSIR on - bit.ly/mvsirunacademy MTP Mar 22 When the demand curve is a rectangular hyperbola an increase in the price of the commodity causesthe total expenditure of consumers of the commodity to.:\, a)Remain unchanged b)Increase c)Decrease d)Any of the above 2Watch all free sessions of MVSIR on - Yaw oo Elasticity of DemandWatch all free sessions of MVSIR on - bit.ly/mvsirunacademy MTP Mari8, Apr 19, Oct 19, ICAI SM Identify the factor which generally 53_keeps the price-elasticity of demand for a good low: a)Variety of uses for that good. b)Very low price of a commodity c)Close substitutes for that good. d)High proportion of the consumer's income spent on it.Watch all free sessions of MVSIR on - bit.ly/mvsirunacademy ICAI SM Demand for a good will tend to be 54 | more inelastic if it exhibits which of the following characteristics? a) The good has many substitutes. b)The good is a luxury~(as opposed to a necessity). c)The good is a small part of the consumer's income. d)There is a great deal of time for the consumer to adjust to the change in pricesWatch all free sessions of MVSIR on - bit.ly/mvsirunacademy AQ. During lockdown due to COVID-19, a consumer finds the vegetable vendors selling vegetables in the street have raised the prices of vegetables than usual prices. She Bes sass plelalal> > BF TBs e Zaeaanan Eeeacce > A é g $f x 3 g & 2 >|s[e[>| z a x 3 x x FESSScScscessse = zg ie Sjsasiige oe ss case elo alalalala 3 4 a x e\o alae eN ECONOMICS & BCK cn Time corer nog Peer eed oye Ort